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Wednesday, May 16, 2007

World Bank President Prepares to Resign!

By JEANNINE AVERSA, AP Economics Writer 2 minutes ago

WASHINGTON - Embattled World Bank President Paul Wolfowitz is negotiating an agreement to resign, according to an official familiar with the talks.

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His departure would include an acknowledgment from the bank that he doesn't bear sole responsibility for the controversy surrounding a generous pay package for his girlfriend, the official said.

The negotiations were taking place as the bank's board resumed deliberations over

Wolfowitz's fate Wednesday afternoon.

The official said Wolfowitz wanted the bank to accept some responsibility for conflicts of interest cited against him by a special bank panel. The official spoke on condition of anonymity because of the delicate state of the negotiations.

It was not clear whether the bank's 24-member board would accept Wolfowitz's terms.

Pressure on Wolfowitz to resign has grown since a bank panel report, released Monday, found that he broke conflict-of-interest rules in his handling of the 2005 pay package of bank employee Shaha Riza.

Wolfowitz has maintained that he acted in good faith.

The bank panel said the board must consider whether Wolfowitz "will be able to provide the leadership" to ensure that the bank achieves its mission of fighting poverty around the world.

The White House, which picked Wolfowitz for the post, indicated for the first time on Tuesday that it was willing to consider new leadership for the bank.

By tradition, the World Bank has been run by an American, with the approval of the bank's board. The bank's sister agency, the International Monetary Fund, is headed by a European.

Wolfowitz canceled a planned trip to a bank-sponsored development conference in Bled, Slovenia, on Thursday and Friday to work with the board.

In a last ditch plea to save his job, Wolfowitz appeared before the board on Tuesday. "You still have the opportunity to avoid long-term damage by resolving this matter in a fair and equitable way that recognizes that we all tried to do the right thing, however imperfectly we went about it," he told the board.

Riza worked for the bank before Wolfowitz took over as president in June 2005. She was moved to the State Department to avoid a conflict of interest, but stayed on the bank's payroll. Her salary went from close to $133,000 to $180,000. With subsequent raises, it eventually rose to $193,590. The panel concluded that the salary increase Riza received "at Mr. Wolfowitz's direction was in excess of the range" allowed under bank rules.

Before taking over the bank nearly two years ago, Wolfowitz was the No. 2 official at the Pentagon and played a lead role in mapping out the U.S.-led war in Iraq.

European members are pushing for Wolfowitz to resign. The United States is the bank's largest shareholder, so his nomination by Bush was approved by the bank's board even though Europeans didn't like him because of his role in the Iraq war.

The recent controversy, which has gripped the bank for a month, has threatened to tarnish the poverty-fighting institution's reputation and hobble its ability to persuade countries around the world to contribute billions of dollars to provide financial assistance to poor nations.

"This has certainly been a bruising episode for the bank, and what you have to do is figure out a way forward to maintain the integrity of the institution," White House press secretary Tony Snow said Wednesday.

Treasury Secretary Henry Paulson and Secretary of State Condoleezza Rice have said the conflict-of-interest charges against Wolfowitz were not grounds for him to be fired.

David Corn Tue May 15, 10:57 AM ET

The Nation -- World Bank president Paul Wolfowitz broke the rules and engaged in an actual conflict of interest when in 2005 he arranged for a rather generous salary boost for his girlfriend, Shaha Riza, a communications official at the Bank.

That's the conclusion of a special panel of the Bank's board of directors, which on Monday released its report on the Wolfowitz matter. This judgment was no surprise; the basics had been leaked days earlier. But the report presented more information that places Wolfowitz in a tough spot--for it suggests that he and Riza brazenly took advantage of the situation created by his appointment to the Bank to guarantee her a promotion and pay rise she had failed to obtain previously. And the question of the moment is the obvious one: can he survive?

Here are some interesting portions of the report:

According to Mr. [Xavier] Coll [vice president of human resources], he met with Mr. Wolfowitz and Ms. [Robin] Cleveland, Counselor to the President, on August 10, 2005, in preparation for a meeting on August 11 with Ms. Riza. During that meeting, Mr. Coll was told to stop consulting with the Bank's General Counsel on this matter.

In retrospect, it's clear there was the need for more legal advice, not less, about what to do about Riza, who could not continue to work at the Bank in a position under the supervision of Wolfowitz. Yet Wolfowitz kept the circle small. He has claimed it would have been a conflict of interest to involve the Bank's general counsel--a contention rejected by the special panel. But even if Wolfowitz had been right about that, he could have sought another way for the human relations department to obtain appropriate legal guidance. He did not.

According to Mr. Wolfowitz, he knew of Mr. Coll's "discomfort" with the proposed agreement with Ms. Riza. He stated that Mr. Coll did not tell him the proposals were outside the Bank's rules, and that, in any case, "there were no established Bank practices for a situation like this." According to Mr. Coll, he told Mr. Wolfowitz and Ms. Cleveland that the terms proposed by Ms. Riza, regarding her promotion increases and guaranteed promotions...were "outside the Staff Rules" and that moving forward with them was a reputational risk to the Bank. In Mr. Coll's view, there is "no doubt that the President knew or had been made aware of by me that this was outside the rules."

If this is so--if the Bank's board believes Mr. Coll--it's end of story. Had Wolfowitz indeed proceeded with a deal after he was warned it was "outside the rules"--a deal that was rather lucrative for his girlfriend--that ought to be a firing offense.

According to Mr. Coll, after he received the written August 11 [2005] instructions from Mr. Wolfowitz [dictating the terms of the Riza deal], he asked again whether he could consult with the Bank's General Counsel, or anyone in the Bank's Legal Department, and was told he could not.

Two strikes for Wolfowitz.

According to Ms. Riza, she arrived at the figure of $180,000 [for her new salary] by taking into account her view that "two consecutive MENA [Middle East and North Africa] Vice Presidents" had not promoted her due to "discrimination," because she is "a Muslim, Arabic woman who dares to question the status quo."

This explains it. Riza was angry. She was mad (as the report notes) that she had to leave the Bank because her romantic partner was taking over. But she also harbored a grudge, believing, rightly or wrongly, that she had been the victim of discrimination at the Bank. (In a previous article, I explained how she was turned down for a promotion to a job for which she did not meet the minimum qualifications.)

According to the panel's report, it was Riza who came up with the specific terms of her reassignment. It seems she was trying to turn lemons into champagne--that is, using the opportunity to settle old scores and award herself the money she believed she deserved. And Wolfowitz went along with his gal-pal.

The report is clear: "The salary increase granted to Ms. Riza far exceeded an increase that would have been granted in accordance with the applicable Staff Rule." The report notes that even had she received a promotion at that time, she could have expected a boost in her annual salary of between $5000 and $20,000--not the $47,000 Wolfowitz awarded her. The report also says that the agreement Wolfowitz arranged called for an annual salary increase more than twice the customary rate and that the automatic promotions awarded Riza in the deal violated the Bank's rules.

The special panel is unequivocal. Wolfowitz engaged in a conflict of interest by setting the terms for Riza's package. "It is the view of the Ad Hoc Group," the report notes, "that these actions show that the relationship between Mr. Wolfowitz and Ms. Riza went beyond the appearance of conflict of interest...and constituted an actual conflict of interest situation." It adds, "these actions manifest a lack of understanding and a disregard for the interests of the institution as a public international organization." The report also finds that Kevin Kellems, a senior aide to Wolfowitz (who recently resigned) made misleading public statements about the Riza deal and that Wolfowitz's "actions are inconsistent with his obligation to "maintain the highest standards of integrity in [his] personal and professional conduct."

This is a damning document. One doesn't have to read far between the lines to see that panel members believe that Riza tried to pull a fast one and that Wolfowitz enabled her, even cutting out other Bank officials who might have questioned the deal. "Her desire for compensation for a past grievance, not related to Mr. Wolfowitz [sic] arrival," the panel says, "appears to have driven the most controversial elements of the agreement she reached with the Bank (with Mr. Wolfowitz directing the Bank's side of the negotiations)." The report slams Wolfowitz for not accepting "responsibility or blame for the events that transpired....The Ad Hoc Group sees this as a manifestation of an attitude in which Mr. Wolfowitz saw himself as the outsider [at the Bank] to whom the established rules and standards did not apply. It evidences questionable judgment and a preoccupation with self interest over institutional best interest."

The board of directors was scheduled to discuss the report with Wolfowitz on Tuesday evening. The issue is, what will the board do in response to the report? It can vote to reprimand or remove Wolfowitz. A reprimand might not be enough for many board members. But the board may not want to pull the trigger. It can issue a vote of no confidence, hoping Wolfowitz will resign. But does Wolfowitz want to put up a fight? Is the White House willing to stick with him, as it has done (so far) with Attorney General Alberto Gonzales? George W. Bush can be a stubborn fellow.

The report is a strong indictment of Wolfowitz. It shows he and his girlfriend tried to game the system in a way that could bring her (over the course of his tenure and beyond, thanks to a generous pension) millions of extra dollars. If Wolfowitz manages to stay on after the release of the report, it will be quite an accomplishment for the accountability's-not-us Bush administration.

******

DON"T FORGET ABOUT HUBRIS: THE INSIDE STORY OF SPIN, SCANDAL, AND THE SELLING OF THE IRAQ WAR, the best-selling book by David Corn and Michael Isikoff. Click here for information on the book. The New York Times calls Hubris "the most comprehensive account of the White House's political machinations" and "fascinating reading." The Washington Post says, "There have been many books about the Iraq war....This one, however, pulls together with unusually shocking clarity the multiple failures of process and statecraft." Tom Brokaw notes Hubris "is a bold and provocative book that will quickly become an explosive part of the national debate on how we got involved in Iraq." Hendrik Hertzberg, senior editor of The New Yorker notes, "The selling of Bush's Iraq debacle is one of the most important--and appalling--stories of the last half-century, and Michael Isikoff and David Corn have reported the hell out of it."

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